Summary

On February 6, 2026, China's financial regulatory system simultaneously released two highly significant policy documents: the "Notice on Further Preventing and Handling Risks Related to Virtual Currencies and Other Related Risks" (Yin Fa [2026] No. 42) jointly issued by the People's Bank of China and eight other ministries, and the "Regulatory Guidelines for the Issuance of Asset-Backed Securities Tokens of Domestic Assets Overseas" released concurrently by the China Securities Regulatory Commission. These two documents have one restricting and one guiding, one internal and one external, together forming a logically coherent and clearly targeted regulatory combination. This marks that China's regulation of digital financial innovation represented by blockchain technology has officially entered a new stage of "systematic construction" and "strategic guidance," moving away from early "movement-style clearing" and "risk warnings." This policy adjustment is by no means just an intensification of strict regulations but is a top-level design aimed at balancing risk prevention and innovative development, and reshaping the future financial infrastructure pattern after a profound insight into global trends and the essence of technology. Its core spirit can be precisely summarized as: implementing a "iron wall" around domestic retail speculation, while opening a "compliant narrow door" for cross-border innovations that serve the real economy.

1. Comprehensive Upgrade and Precise Definition: Blocking All Paths to Systemic Risk

This "Notice" first demonstrates a strategic expansion of regulatory scope and an unprecedented strengthening of qualitative forces. Its most significant feature is the clear inclusion of "tokenization of real-world assets" (RWA) into the regulatory core and placing it under the same stringent scrutiny as virtual currencies. This measure is forward-looking and decisive. RWA, as a global fintech trend that digitally represents and trades traditional assets (such as bonds, real estate income rights, commodities, etc.) through blockchain technology, essentially represents an iteration of asset securitization technology. If left unchecked, it could very likely evolve into a "technological dark channel" that bypasses core regulatory frameworks related to securities issuance review, information disclosure, and investor suitability management, fostering more complex issues such as illegal fundraising, fraud, and cross-infection of financial risks. The "Notice" clearly states that conducting unapproved RWA activities within the country, such as illegal issuance of token vouchers, unauthorized public issuance of securities, and illegal operation of futures business, constitutes illegal financial activity. This definition completely shuts down any illusions of attempting "regulatory arbitrage" in the name of "technological innovation" and establishes the unshakable fundamental principle that "regardless of how technological forms change, financial activities must operate with a license and must be subject to regulation."

At the same time, the "Notice" is also more resolute and thorough in defining existing risks. It not only reaffirms the non-monetary attribute of virtual currencies like Bitcoin but creatively identifies "stablecoins pegged to fiat currencies" as "indirectly fulfilling part of the functions of fiat currencies" and strictly prohibits the issuance of any unapproved stablecoins pegged to the Chinese yuan. This clause is strategically insightful, aiming to preemptively strike at any potential challenges that could undermine the sovereign status of the yuan and construct a parallel settlement system in the digital space. By categorizing all business activities related to virtual currencies (including exchanges, market making, information intermediary, derivative trading, etc.) as "illegal financial activities" and abolishing the old notice from 2021, the regulators convey a firm determination to eliminate existing risks and leave no gray areas.

2. Building a Full-Chain Penetrating "Firewall": Three-Dimensional Isolation from Funds to Information

If qualitative definitions signify the declaration of positions, then the regulatory execution framework constructed within the "Notice" reflects a powerful systematic capability to transform those positions into reality. It deploys a full-chain, penetrating regulatory network covering "fund flows, information flows, and technology flows," aiming to physically isolate risks.

At the level of fund flows, regulatory requirements have reached an unprecedented level of strictness. All financial institutions and non-bank payment institutions are completely prohibited from providing any form of services for relevant activities, from account opening, fund transfers, clearing and settlement, to product issuance, inclusion of collateral, and conducting insurance business, achieving a total shutdown of financial channels. This effectively cuts off the "umbilical cord" between the digital asset sector and the mainstream financial system, preventing it from obtaining legitimate liquidity inputs and credit support.

In terms of information flow and marketing, the regulation exerts pressure both online and offline. Online, internet companies are strictly prohibited from providing online venues, business displays, marketing promotions, and paid traffic guidance, and are required to proactively report clues and offer technical assistance. Offline, market regulatory departments prohibit the use of terms like "virtual currency," "RWA," etc., from the source of business registration names and operational scopes, and strengthen advertising regulation. This combination of measures aims to eliminate the "visibility" and "legitimacy insinuation" of digital assets in the public domain, reducing speculative enthusiasm and participation willingness on a social cognition level, serving as a form of deep-seated risk prevention in social psychology.

At the technical and physical level, the rectification of virtual currency "mining" activities continues to deepen, clearly defining the overall responsibility of provincial governments, prohibiting new projects, and cleaning up existing ones. More critically, the policy innovatively introduces a "foreign service blockade" clause. It clearly states that "foreign entities and individuals are prohibited from illegally providing virtual currency-related services to domestic subjects in any form," and lays down responsibilities for domestic facilitators. This extraterritorial clause, combined with strict controls on cross-border payment channels, essentially constructs a "financial digital boundary" against the global internet, creating a strong legal deterrent against any offshore exchanges or DeFi agreements attempting to serve Chinese users.

3. Opening the Only "Compliant Narrow Door": The Strategic Intent of the CSRC's "Guidelines"

While the "Notice" builds a tight defensive wall, the CSRC's "Guidelines" meticulously design and open a highly restricted yet profoundly significant "door." This door only leads to a specific destination: allowing for the issuance of asset-backed securities (ABS) tokens overseas, supported by domestic assets or cash flows.

This is by no means an easy option for virtual currency speculation but rather a precise "guidance," and its design reflects extremely high strategic considerations. First, its business model is strictly limited: the underlying assets must be domestic real entities or their income rights generating stable cash flows (such as infrastructure toll rights, trade receivables, leasing assets, etc.), the issued tokens must conform to financial logic as ABS, and the issuance market and investors must be strictly limited to overseas. This ensures that the innovative activity is tightly anchored to the real economy, serving the genuine needs for cross-border financing of enterprises, and is completely isolated from the domestic retail speculative market.

Secondly, its regulatory approach is extremely stringent: employing a "domestic entities must file with the CSRC in advance" model, rather than simply a post-issue report. The filing entity must submit a complete set of issuance materials for overseas issuance, accepting a penetrating review of the authenticity of the underlying assets, compliance of transaction structures, and effectiveness of risk isolation. This is earlier and deeper than traditional overseas bond issuance or listing regulatory interventions, embodying the regulatory concept of "same business, same risk, same rules," ensuring that innovation does not escape regulatory oversight.

The opening of this "narrow door" carries at least three strategic intentions: first, to serve real financing: creating a pilot channel for quality domestic enterprises to use blockchain technology to enhance the efficiency and reduce the cost of cross-border asset securitization; a direct manifestation of fintech empowering the real economy. Second, to accumulate regulatory experience and talent: in the risk-controlled "overseas sandbox," regulatory agencies, financial institutions, and legal intermediaries can closely observe, understand, and manage the entire process of asset tokenization, accumulating valuable regulatory experience and nurturing professionals for potential larger-scale financial digital transformation in the future. Third, to participate in the shaping of international rules: through proactive regulation and practice, China can accumulate discourse power in the global financial frontier of asset tokenization, avoiding passivity in future international rule-making processes, which is a profound layout in the financial competition of major powers.

4. Emerging "Dual-Track" Ecology and Global Regulatory Divides

The combinational effect of the "Notice" and the "Guidelines" will profoundly shape China's future digital financial ecology and may accelerate the differentiation of global regulatory patterns.

Domestically in China, a clear outline of a "dual-track" digital financial ecology has begun to emerge. The first track is a "completely closed retail track": any trading, financing, or derivative activities related to cryptocurrencies and speculative tokens targeting ordinary domestic investors will be imposed long-term and comprehensive prohibitions, forming a safety zone of "internal circulation" largely isolated from the globally public chain-dominated crypto ecosystem. The second track is a "limited open institutional and cross-border track": applications based on alliance chain or permissioned chain technologies aimed at serving the real economy and cross-border capital flows will be encouraged and developed. The research and application of Digital Currency (e-CNY) and the potential future construction of blockchain infrastructure for the registration, trading, and settlement of specific financial assets led by the state will become the core pillars of this track. Innovations in RWA can only occur strictly within the second track, following the paths outlined in the "Guidelines."

From a global perspective, China's regulatory path fundamentally diverges from the compliance path that major economies like the US and EU are exploring to "incorporate crypto assets into existing securities or commodity regulatory frameworks." China has opted for a unique model of "sovereignty priority, risk isolation, and pilot innovation." This is not only due to considerations of financial stability but is also a deeper defense of national core interests such as monetary sovereignty, capital account management, data security, and cross-border flows. This divergence implies that the global digital asset market may further fragment, forming regional markets with differing technical standards, asset categories, and investor structures. China's choice provides another potential regulatory paradigm reference for other emerging economies that prioritize financial sovereignty and control.

5. Far-reaching Impacts and Future Outlook: Redefining Red Lines and Routes

In summary, the policy documents released in early 2026 have profound and complex impacts. For market participants, this serves as a definitive "clearing signal." All business operations related to virtual currencies and unapproved digital assets within the country have no viable space for survival, and individuals participating also face high legal and financial risks. Fantasies of "policy warming" are no longer a reality. The only real opportunity exists on a single path: to completely abandon short-term speculative thinking, deeply understand national strategic intentions, and engage in long-term and arduous technological and model innovations in directions that serve the real economy, comply with cross-border capital management policies, and rely on officially recognized technological paths.

From the perspective of national strategy, this policy combination is a proactive "mine-clearing" and "foundation-laying" for financial infrastructure. It has cleared away potential "weeds" that could interfere with the stability of the core financial system, erode monetary sovereignty, and trigger social risks with unprecedented force, paving the way for the next step of "sowing" self-controlled national-level financial digital infrastructure. The most stringent prohibitions often foreshadow the most prudent preparations. It is foreseeable that in the future, China's efforts in the field of blockchain finance will focus on areas led by "national teams," such as central bank digital currencies, trade finance blockchain platforms, and standardized asset digital transactions.

Ultimately, this set of policies has redefined the insurmountable red lines for China amid the turbulent global digital financial transformation—namely, national security, financial stability, and the safety of people's property; it has also signaled the possible exploratory routes—namely, technology must empower entities, innovation must obey regulation, and development must serve strategy. It announces that China will independently shape its future landscape of digital finance according to its own rhythm and logic. The establishment of this new paradigm represents not only an upgrade in regulation but also a profound choice of national financial strategy, the impact of which will continue to manifest over the next decade and even longer.